Advisory

Best Tax Saving Instrument plans

If you have still not done tax planning for the current financial year, you need to move fast. With March 31 approaching, last minute hurry may lead to wrong decisions

WORDS: SANGEETA SINHA

Most of us start planning for investing in tax saving instruments at the last moment. As the financial year approaches closure end we rush to tax consultants. Sometimes in the rush we end up making wrong decisions and often miss out on smart investments. It is always a good idea to plan your investments a little early so that you have ample time to research and make wise decisions.
Another advantage of planning early is that it helps you in managing your finances as you can invest in a staggered manner. There are many schemes like Public Provident Fund (PPF) or National Pension System (NPS) which allow 12 transactions a year.

Often when we rush for last minute investments our focus simply remains on tax saving and in the process we miss out on other important aspects of investment. Ideally one needs to look for investment plans which offer maximum tax savings with minimum risk.

Section 80 C
Before we discuss some of the good tax saving plans, we need to understand section 80 C of Income Tax Act as most tax saving plans work as per this section. It allows deduction up to Rs 1.5 lakh.
Investments like ELSS (Equity Linked Saving Scheme),

Life Insurance, PPF, National Savings Certificate (NSC), bonds etc can be used to save tax under this section. The deduction you make towards these investments is tax deductible. It doesn’t matter if you invest in one or more of the above investments, the deduction will stop as soon as it reaches its limit of Rs 1.5 lakh.

Tax saving plans
There are several options and you need to devise your own plan based on your requirement and income. You will need to pick the plan which suits you.

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ELSS – Specially designed for tax saving purposes, this equity based tax saving option has the advantage of a short term lock-in period of 3 years. The investment in an ELSS can also be made through a SIP (Systematic Investment Plan) wherein you invest a small fixed amount every month instead of paying a large amount altogether.
Being a market linked product they are high risk but also offer the potential of high returns. For tax purposes, returns from an ELSS are tax free; long-term capital gains from equity funds are exempt from tax. You can claim up to Rs. 1.5 lakh of your ELSS as a deduction from your gross total income in a financial year under Sec 80C of the Income Tax Act.

ULIP (Unit Linked Insurance Plan) – This investment product comes with life insurance as well. ULIPs offer tax benefits at the time of investment as well as on maturity and it also provides life cover to the person taking the policy.
Money invested in ULIP can be claimed as deduction. However it is important that you pay your premiums and keep your plan alive to avail tax benefits. If the ULIP is discontinued before 2 years, tax benefits u/s 80C will not be allowed. Any deduction allowed in the previous years will be added back to your income in the year in which ULIP is closed.

Tax free bonds - A bond is a fixed income instrument carrying a coupon rate of interest and is issued for a fixed tenure. As the name suggests, interest earned from tax-free bonds is exempt from tax.

PPF– A Long term saving scheme issued by the Central Government, this is good for investors who look for assured earnings. Under section 80C, the contribution made towards PPF is tax deductible and interest earned and received at the maturity is absolutely tax free.
With a lock-in period of 15 years this option may not be suitable for those looking for a short term tax-saving investment but the tax free status gives it a distinct advantage over fixed deposits. You can withdraw a certain amount from PPF after the fifth year without any prepayment penalty.

NSC – Similar to PPF, this is also risk-free with guaranteed returns and saves tax under section 80C. With NSC, no tax is deducted at source and it is the responsibility of the certificate holder to declare the income so that appropriate income tax can be calculated and charged. In case of bank FDs the tax that is due to be paid on the returns earned is deducted at source by the banks but needs declaration.

Life insurance premium – This comes with dual benefit; gives life cover plus the premium you pay on a life

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insurance plan is deductible from your total income under section 80 C. The proceeds of a life insurance policy, whether the maturity amount or the sum assured, are exempt under Section 10(10D) of the Act.

NPS - It is one of the few tax saving investments options that let the investor surpass the Rs 1.5 lakh limit of deduction set by section 80C. The percentage of basic salary (up to a max of 10%) that your employer contributes towards your NPS is tax deductible. An additional Rs 50,000 can also be invested in NPS for tax deductions under Section 80CCD(1B).
One also needs to keep in mind that on maturity one has to compulsorily invest 40 per cent of the accumulated corpus in annuity which gets locked in for lifetime and is also entirely taxable. Some pension plans don’t have such restrictions; enquire and understand all the pros and cons before you invest.

Senior Citizens’ Saving Scheme (SCSS) - This offers regular income apart from giving tax benefits too. Anybody over 60 can invest in this government backed scheme. The tenure of the scheme is 5 years, which is extendable by another 3 with an investment limit of Rs 15 lakh and gives 8.6% per annum. Investment in SCSS qualifies for deduction under Section 80C of the Income-tax (I-T) Act.

Sukanya Samridhi Scheme (SSS) – This is a small deposit scheme for the girl child launched as a part of the ‘Beti Bachao Beti Padhao’ campaign. An SSS account can be opened any time after the birth of a girl till she turns 10, with a minimum deposit of Rs 1,000. The account has an annual cap of Rs 1.5 lakh and the interest is tax free.
The account can be opened for up to two daughters, but the combined limit is Rs 1.5 lakh in a year. Accounts can be opened in any post office or designated banks.

Payment of children’s tuition fees - The tuition fee paid for the education of two children is eligible for tax deduction under Section 80C of up to Rs 1.5 lakh. The fee can be paid to any school, college, university or educational institute situated in India. The fees have to be for a full-time course only.

Repayment of home loan - The repayment of the principal of a loan taken to buy or construct a residential property is eligible for tax deductions under Section 80C. This deduction is also applicable on stamp duty, registration fees and transfer expenses.

BEYOND SECTION 80 C – EXPERT ADVISE

We spoke to Binita Sengupta, a fellow member of the Institute of Chartered Accountants of India with over 17 years of professional experience in Audit, Income tax & Corporate Tax laws. She is currently practicing and providing consultancy services with special emphasis on Income tax, corporate matters and GST. She gives us insight on tax savings which can be done beyond section 80 C

Apart from section 80 C, certain other sections of income tax also allow you to save tax over and above the 80C limit of Rs 1.5 lakh.

Tax saving on house rent allowance – House rent allowance, commonly known as HRA, is a major chunk of a salaried individual’s total pay. Under Section 10 (13A) of the Income Tax Act, you can save tax on the rent you pay to your landlord. However, you get partial tax benefit on the rent you pay.

The amount that is allowed for exemption under HRA is calculated as the minimum of:

i) Rent paid annually minus 10 per cent of basic salary plus dearness allowance
ii) Actual HRA received
iii) 40 per cent of basic and dearness allowance (50 per cent in case of metro cities).

Your HRA allowance will be taxable if you are not paying any rent or you stay in your own house. But those who stay with their parents can also claim HRA benefits by paying rent to their parents.

Health Insurance – Premiums paid for health insurance for self, spouse, children, and parents qualify for deduction under Section 80D. One can claim deduction of Rs. 25,000, if he is below 60 years of age, and Rs. 30,000 if above 60, towards medical insurance premium paid for self, spouse and children.

Under this section, additional deduction of Rs. 25,000 is available if one buys medical insurance for parents. This deduction can go up to Rs. 30,000 per year if parents are above 60. So the total deduction you get under Section 80D is up to Rs 60,000. This is in addition to Rs. 1.5 lakh deductions you avail under Section 80C.

Medical allowance – Medical reimbursement is an arrangement under which employers reimburse the portion of the health expenses incurred by the employee.

The Income Tax act allows exemption of up to Rs.15,000 on medical reimbursements paid by employer.

Expenditure on the health of disabled person Section (80DD) - If a taxpayer has dependent parents, spouse, children or siblings who are differently-abled, then he can claim deductions up to Rs. 75,000 for expenses on their maintenance and medical treatment under this section. If the disability is severe in nature, then the deduction can increase to Rs 1.25 lakh.

Deduction under Section 80DDB - Under this section, one can claim deduction of Rs. 40,000 for medical treatment of specified disease or ailment for self and dependents. The deduction can go up to Rs. 60,000 if the taxpayer is above 60 and if he is above 80, then the deduction amount is up to Rs. 80,000. The diseases have been specified in Rule 11DD. To claim this benefit a certificate in form 10 I is to be furnished by the taxpayer from any registered doctor.

Deductions under Section 80CCD (1B) - Under this section, one can get tax benefits on investments up to Rs 50,000 in NPS tier 1 account. This is over and above the Rs 1.5 lakh limit under Section 80C. An individual in highest tax bracket can save Rs. 15,450 by investing Rs. 50,000 in NPS under Section 80CCD(1B).

Deduction under Section 80E - If you have taken an education loan for yourself, spouse or children, then the interest paid on the loan qualify for tax benefit under Section 80E. The best thing here is that there is no upper limit on the amount of deduction. But the criterion is that the loan must have been taken from a financial institution or approved charitable institution and for full-time higher education.

Deduction of interest on housing loan (Section 24B) – If you have taken a housing loan, then the interest you pay on it qualify for tax benefit under Section 24B. Interest paid up to Rs 2 lakh in a financial year on housing loan is allowed as deduction from your income. If you have taken a home improvement loan, then interest up to Rs 30,000 will be allowed as deduction under this section.

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Deduction under Section 80EE – Reintroduced in Union Budget 2016, an additional deduction of Rs. 50,000 is available under this section, which is over and above the limit of Section
24B on interest paid on home loans if a person is buying a house for the first time.

But there are conditions to avail this benefit:
a) The cost of the property must be below Rs 50 lakh
b) The loan amount must be less than equal to Rs 35 lakh.
c) The property must be bought after April 1, 2016.

Donation to specified institutions (80GGA) – If you have donated to an institution carrying on scientific research or to a university or college which is approved by the government, then the amount contributed would be eligible for deduction under this section. The mode of payment cannot be cash; any mode other than cash can be claimed for deduction.

Donations to social causes: You are entitled to tax benefits under section 80 G if you make any donations for social cause. Make sure that the organisations you donate to are covered under this scheme.

In addition to the above, one must not miss out the dates of payment of TDS & advance Tax. TDS liability arising out of any payments made during a month is to be paid before the 7th of the following month.

ONE PERSON COMPANY (OPC)

You want to start a company but not sure if you want it to be a proprietorship, partnership or private limited…amidst the confusion there comes a new concept called OPC. If you as an entrepreneur are capable of starting a venture on your own then OPC is for you. It allows you to create a single person economic entity. Read on to understand what exactly OPC is and how it can help you.

WORDS: SANGEETA SINHA

Introduced through the Companies Act, 2013 the concept of ‘One person Company’ (OPC) encourageVs self-employment with a backbone of India’s legal system. OPC is the best way to start a company if there is only one promoter/founder; you avail of the advantages of limited liability and the benefit of separate legal entity as well. OPC requires only one member and that is its biggest advantage; for a private limited company minimum of two members are required.

OPC comes with its own benefits where the liability of the member is limited; any loss or debts which is purely of business nature will not impact personal savings or wealth of an entrepreneur. Since complete control of the company is with the single owner, it helps in making fast decisions and execution. The owner can appoint as many as 15 directors in the OPC for administrative functions, without giving any share to them. Though OPC has its advantages and it allows a single entrepreneur to operate a corporate

entity with limited liability protection, it has its limitations too.
OPC is suitable only for small businesses. It can have maximum paid up share capital of Rs.50 lakh or turnover of Rs.2 crore. If the annual turnover crosses Rs.2 crore then the company has to be converted into a Private Limited Company and must file audited financial statements with the Ministry of Corporate Affairs at the end of each Financial Year like all types of companies. OPC cannot carry out non-banking financial investment activities.

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Therefore it is important to understand all aspects of this One Person Company prior to incorporation.
It is essential to have a nominee who becomes the member of the company in case of death or any other incapacity of the original member. You also need to know that you cannot incorporate more than one OPC or be the nominee of more than one OPC. Also a minor cannot be a member or nominee of OPC.
WHO CAN FORM AN OPC?
Only a natural person (Not Association of persons, Body of Individuals, Company, or any other entity) who is a resident of India in preceding calendar year (stayed in India for 182 days) can form OPC. There is threshold of paid up capital (Rs. 50 lakh) and average annual turnover (Rs. 2 crore) in 3 immediate preceding financial years, beyond which the status of OPC is lost.

STEPS TO REGISTRATION
Digital Signature Certificate (DSC) – You need to apply for DSC, which is required to digitally sign all documents submitted online under Information Technology Act, 2000 as Application for incorporation of companies is done online. DSC is issued by Certifying Authorities, registered with Controller of Certifying Authorities.
Director Identification Number (DIN) – After getting DSC done one needs to apply for the DIN of the proposed Director in Form DIR – 3 along with the name and the address proof of the director.
Name Approval Application – The next step while incorporating an OPC is to decide on the name of the Company. INC – 1 has to be filed for the name approval to the Ministry of Corporate Affairs (MCA) by giving 6 names in the order of the preference.
Documents – The Memorandum of Association (MoA) stating the business for which the company is going to be incorporated and The Articles of the Association (AoA) which lays down the bylaws on which the company will operate will have to be prepared.
Nominee – Nominee has to appointed and his consent in Form INC – 3 will be taken along with his PAN card and Aadhar Card.
Proof of ownership – Proof of the registered office of the proposed Company, proof of ownership and Affidavit and Consent of the proposed Director is required. Also a declaration by the professional certifying that all compliances have been made.
Application for incorporation- This application has to be filed with the Registrar within whose jurisdiction your registered office will be located via e-form INC-32.
Once the Registrar of Companies (ROC) issues a Certificate of Incorporation business can start.

EXPERT QUESTIONS
Surabhi, Associate Advocate with Legal Consultus, a New Delhi based law firm gives us more insight into One Person Company. Surabhi specialises in Corporate and Consumer laws.
Q. Can a private company convert itself into OPC?
A. Yes a private company can convert itself into OPC provided it meets the following conditions – it must have a paid up capital of Rs. 50 lakh or less; it must have its average annual turnover of Rs. 2 crore or less. It will have to pass a special resolution in General Meeting and then file an application in Form No. INC. 6 for its conversion into One person Company.
Q. When will a company cease to operate as an OPC?
A. It will cease to operate as an OPC where the paid up capital exceeds Rs.50 lakh or its average annual turnover during the relevant period exceeds Rs.2 crore.
Q. When can an OPC be converted into Private Limited Company?
A. OPC has an option of getting converted into a Private Limited Company but only when 2 years have expired from its date of incorporation except where the paid up share capital is increased beyond Rs 50 lakh or its average annual turnover exceeds Rs. 2 crore during the relevant period.
One Person Company then can file forms with the registrar of companies for conversion into Private Limited Company within a period of six months on breaching the above threshold limit.
Q. What if, a nominee of one OPC becomes a member of another OPC?
A. A nominee of one OPC cannot be a member of another OPC as per the Act. If he is a member of two OPCs he will have to withdraw his membership from either of the OPCs within 180 days.
Q. What is the Process of Conversion of a Private Limited Company to an OPC?
Obtain NOC from members and creditors of the Private Limited Company
Pass a Special Resolution for conversion
File Special Resolution in Form No. MGT.14 with ROC
File fees and application in Form No. INC.6 and supporting documents with ROC.
Q. Whether a Non-Banking Financial Investment Company can be formed as a One Person Company?
A. As per the provisions of the Act, the OPC cannot carry the business of Non-Banking Financial Investment activity including investment in security of any corporate.
Q. Which form is to be filed in case of withdrawal of consent by the nominee of an OPC or in case of intimation of change in nominee by the member?
A. The member shall file Form INC-4 in case of withdrawal of consent by the nominee or in case of intimation of change in nominee.
Q. When can a One Person Company apply for its closure?
A. OPC can apply for its closure if-
It was non-operative for at least one year.
At least one year should have lapsed from the date of incorporation.

VACATION PLANNING Start saving for that exciting outing

Vacations are as important for our overall wellness as healthy food and exercise. In today’s fast-paced world when we list down our priorities we often forget about relaxation and vacations. Most of us skip vacations due to lack of money. It is time we give our vacations priority and start saving and planning. Here’s how to do it.

WORDS: SANGEETA SINHA

We often dream of a nice, relaxing and happy holiday with our loved ones but it does not materialise many times due to lack of advance planning and saving. Taking vacations is good for your health; a lot of studies have highlighted the cardiovascular health benefits of taking a vacation.

Relaxing and getting away from your worries — both personal and professional — can help lower anxiety, heart rate, and blood pressure, which can in turn lower the risk of heart disease and chronic illness caused by stress.

The most important part of any vacation is to fit it in your budget and for that planning is the key. First of all you need to zero-in on your destination. Destination and the duration of your vacation should be such that they fit in your budget and do not hit your bank balance.
Next you can research for holiday packages. Travelling off-season is also a good idea if you wish to you save money.

Travel companies offer many plans. You can go for group holiday, family holiday or you also have the option to get the package customised. If you are the adventurous kind you can also go solo.
For most of us the biggest constraint in going for a vacation is finance. But these days with advance planning and regular saving you can enjoy your dream vacations. Understanding the requirement of market, a lot of travel agencies have come up with packages which can help you plan and save money for your vacation.
Some of the popular schemes are listed below. Do your own research and find out about such schemes floating in the market. Based on your requirement you can choose the scheme and plan your vacation.

SAVINGS HOLIDAY SCHEMES
These days the concept of ‘savings holiday schemes’ is very popular.

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These schemes are offered by travel companies where you can save for the holiday package at the current tariffs without worrying about the change in air fares and hotel tariffs during the time of travel.
HOLIDAY SAVING ACCOUNT
Many travel companies have come up with innovative plans that allow people to save money for big vacations.

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Holiday saving account is one such scheme where travel companies have tied up with banks like ICICI Bank and Kotak Mahindra Bank.
One travel agency offers a unique savings plan for holiday goers. Under this scheme you can save monthly amount in the form of a recurring deposit with the bank in order to avail a vacation package. The cost of the package you choose is divided by 13 and you pay for 12 months and at the end of the year, the maturity proceeds are transferred to the travel company to pay for your pre-selected holiday package. The company funds the balance amount i.e – the 13th installment – to purchase your package after factoring in the accrued interest.

HOLIDAY INVESTMENT PLAN
Holiday investment plans are also being offered by travel companies in partnership with various leading banks.

EMI SCHEME
You can opt for this scheme when you are ready for a vacation but tight on the budget. The EMI option being offered by many travel companies has large takers. Whether it is domestic or international holiday, you can choose your destination and divide all your expenditure into easy EMIs. You may have to pay minimum down payment and the rest is taken care of.
It is all about prioritising. A vacation has to be taken as a therapy and should be on our agenda. You don’t have to go for long or expensive destinations but break is something we all need for our overall wellness and productivity. Options are many, financing is also available…you just need to make up your mind.
So next time when you budget your expenses make sure you don’t miss out on the vacation.

HOW VACATION HELPS
Relieves stress – Stress can take a serious toll on your physical health. Chronic stress can be destructive to our bodies. Getting away from personal and professional stress can help your physical health
More productivity – Your productivity and focus increases after a good break. Continuous work with no breaks or vacations can make people feel blocked and distracted, and they have problems concentrating
Increases family bonding – Family vacations increase bonding and help forge closer bonds. They create more memories than any other activity
Makes you happy – People who take regular vacations feel extremely happy with an overall feeling of well-being

FUND YOUR VACATION
Planning and scheduling well can help you save a good deal on your vacation
Plan well in advance so that you can save on air fare
Keep a separate fund for vacations; many schemes are being offered by travel companies – study them well
Recurring deposit with your bank is a good option if you are saving for a holiday 1-2 years away
For greater flexibility, and possibly higher returns, you can opt for short-term debt funds; they offer stable returns and are not very volatile.
For bigger vacations SIP is also a good idea; if you have 3-4 years to plan then you can add equities too
Keep your eyes and ears open for latest updates

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SOME TIPS
Choose your destination and duration keeping your budget in mind
Next look for best packages to your selected destination
Research on your destination; it helps making your own itinerary
One of the best ways of going about it is visiting the country’s official tourism website and read their recommendations
List all essential items you would need so that you don’t miss any important thing
If you are travelling abroad, a valid passport and tourist visa should be in place
Do not forget to check if there are some country guidelines on specific vaccinations you might have to take before your visit
Don’t miss on the travel insurance

STAYCATION
A period in which an individual or family stays home and participates in leisure activities within driving distance, sleeping in their own beds at night. They might make day trips to local tourist sites, swimming venues, or engage in fun activities such as painting, hiking or visiting museums. When on a tight budget and when annual family vacation becomes difficult it can be used as a cheaper substitute where you save on air tickets, accommodation etc. It is called fun vacation or stay-at-home-vacation.

Finance terms simplified

Financial terms often intimidate us. But once you understand the terms they look simple. Read on for some investment terms simplified. Self-knowledge is always the key to good investment

WORDS: SANGEETA SINHA

SIP (Systematic Investment Plan)
In SIP an investor invests a fixed amount of money monthly or quarterly in a mutual fund. The investor is allocated a number of units according to the current NAV (Net Asset Value). Every time a sum is invested, more units are added to the investor’s account.
Instead of making one heavy investment it allows you to make small periodic investments. It is like a recurring deposit where you invest in a mutual fund without altering your financial liabilities.
IPO (Initial public offering)
Also colloquially called ‘going public’, IPO is a type of public offering in which shares of a company are made open to public; the owners of the company give up part of their ownership to stockholders and they transform from private to public company.
In simple words, IPO is a source of collecting money from the public for the first time in the market to fund its projects. In return, the company gives shares to the investors of the company.
NFO (New Fund Offers)
NFO is a security offering where investors may purchase units of a closed-end mutual fund. This offering, similar to a stocks’ initial public offering (IPO) allows the underlying company to raise capital for the purpose of buying securities. The difference being that for an NFO there is no past performance as it is a new fund.
Balanced Fund
A balanced fund combines a stock component, a bond component and sometimes a money market component in a single portfolio. It is a type of mutual fund that has a policy of diversifying shareholder assets between both stocks and bonds, providing a one-stop solution for those who want everything in a single package. These are ideal for investors looking to retire in the near future and have a moderate risk appetite.
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Consolidated Account Statement (CAS)
Due to a recent amendment in SEBI regulations, Consolidated Account Statements are being issued which contains complete information of your portfolio in one statement.
It covers all schemes and mutual funds and can be viewed online. You can now request for a CAS across your entire holdings in mutual fund scheme services by Mutual Fund Registrars, CAMS, Karvy, FTAMIL and SBFS.
Mutual Fund
A mutual fund is a professionally-managed investment scheme. The number of units you purchase represents your share of holding in the particular scheme. The units can be purchased or redeemed at the fund’s current Net Asset Value (NAV). The NAVs fluctuate and so the investor also participates proportionally in the gain or loss of the fund.
All mutual funds are registered with SEBI with strict rules created to protect the interests of the investor.
Debt Fund
Debt funds are mutual funds that invest in fixed income securities like bonds and treasury bills. Debt funds are preferred by individuals who are not willing to invest in a highly volatile equity market.
Comparatively less volatile, a debt fund provides a steady but low income relative to equity. The main investing objectives of a debt fund are largely preservation of capital and generation of income.
ELSS (Equity Linked Savings Scheme)
These are tax-saving mutual funds that you can use to save income tax of up to Rs 1.5 lakh under Section 80C. ELSS funds have a lock-in period of 3 years and invest a majority of their portfolio in the stock market. Since these are equity mutual fund schemes which invest in stocks, invest in them only if you can handle the volatility in the stock market.
Equity Fund
An equity fund (also known as stock fund) is a mutual fund that invests principally in stocks. Stock mutual funds are principally categorised according to company size, the investment style of the holdings in the portfolio and geography.
AMC (Asset Management Company)
Asset management companies provide investors with more diversification and investing options than they would have by themselves. These companies charge service fees and they manage mutual funds, hedge funds and pension plans for clients.
NAV (Net Asset Value)
Net Asset Value is a fund’s market value per unit. It is calculated by dividing the total value of all the assets in a portfolio, minus all its liabilities. NAV is calculated at the end of every market day but it is advisable to look for annualised returns rather than daily returns while selecting a mutual fund for investment.
Load
Mutual fund companies collect an amount from investors when they join or leave a scheme. This fee is generally referred to as a ‘load’. Entry load can be said to be the amount or fee charged from an investor while entering a scheme or joining the company as an investor.
Exit load is a fee or an amount charged from an investor for exiting or leaving a scheme or the company as an investor.
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CAR INSURANCE DOES IT COVER ALL?

If you think everything damaged with your car is claimable then you need to read further

The recent Mumbai floods saw many stranded and damaged vehicles. It also made many realize that all kinds of damages may not be covered under the car insurance policy which one takes. It is a good idea to spend some time understanding what gets covered and what doesn’t. Read on as we try to cover the basics.
Rakesh filed a claim for his car engine being stalled as water entered the engine through the hydraulic lock; little did he realize that this comes under mechanical or electrical breakdown and therefore not covered under standard motor policy. Had he opted for add-on cover of engine protection he would have been covered.
It is important to understand the add-on covers and add those to your policy as per your requirement. Just going for a standard policy may not serve your purpose always. Add-on coverage can improve the value of your car insurance plan provided you make wise choices.
So, how to take the perfect car insurance policy?
While buying a vehicle we spend large amount of time and energy in choosing the vehicle but we generally don’t do the same while buying insurance policy for the same. And this is the reason that we often end up not having adequate protection or cover in case of any damage. It is a good idea to compare various insurance products and also understand the terms and conditions well.
A motor insurance cover generally offers two types of policies: liability only and package policy. Liability is mandatory and it does not cover damage to your vehicle. It is wiser to go for package policy which includes liability along with damage to owner’s vehicle and is called O.D cover.
Third party insurance is mandatory as per the Indian Road Safety Act and Indian Motor Vehicles Act. It provides you cover against damages caused to any third person, vehicle or property, but you cannot seek any claim for damage caused to your own self or your vehicle. Go for comprehensive cover that will protect you against damages caused to you and your car in an accident. It will also protect you against fire, theft etc. as per the plan you opt for.
But in spite of opting for comprehensive coverage often our claims are rejected and that is because we miss out on add-ons. Based on your requirement you buy add-ons for your car insurance. Sometimes these add-ons help you save huge amount of money.

SOME ADD-ONS
ZERO DEPRECIATION – This add-on entitles you to claim full cost of replacing damaged car parts; in case of standard policy only the depreciated value of car parts is reimbursable and not the replacement value.
ENGINE PROTECT – Engine protect helps when engine fails due to other natural calamities like floods. Basic policy does not cover this so with this add-on you can enhance your coverage. It generally covers damages like leakage of lubricating oil, gear box damage, damage due to water ingression etc. The scope of coverage varies from company to company so it is better if you read the policy carefully before you invest. This add-on is especially advisable for people living in flood prone area or if you have a high-end car.

RETURN TO INVOICE – RTI is an add-on option which covers the gap between the insured declared value and the invoice value of the car. The cost of the RTI is usually 10 per cent more than the standard policy and is offered by insurance providers till the vehicle reaches a predefined age limit.
QUICK ASSISTANCE OF ROAD – Quick assistance of road add-on enables basic services in case of an emergency while driving through a remote location. Such add-on policies can get fuel assistance, taxi and accommodation benefits when stranded in a remote destination. While some companies offer this service for small fee i.e. as an add-on insurance cover, others offer it as an in-built component of the base policy. Some companies extend this cover only for renewed and not fresh policies.
NO-CLAIM BONUS PROTECTION (NCB) – No-claim bonus (NCB) is a discount in premium offered by insurance companies if a vehicle owner has not made a single claim during the term of the motor insurance policy. This NCB starts at 20% and increases annually with every claim-free year up to a maximum of 50%. It directly translates into lower premium for the subsequent year. NCB add-on allows you to retain your accumulated no-claim bonus even if there is a claim, helping you preserve the discount available on subsequent year’s premiumPERSONAL ACCIDENT COVER – This add-on covers both owner as well as paid driver.
Several insurers offer this add-on, which, like any other personal accident cover, provides lump-sum compensation to the passengers insured, in case of death or permanent total or partial disabilities suffered during accidents.
Normally, the maximum sum assured under this add-on plan is around Rs 1 lakh per insured but may vary from insurer to insurer.

LOSS OF PERSONAL BELONGINGS – Loss of personal belongings add-on lets users report claim due to theft or apparent loss of personal belongings including laptop or electronic equipment from a locked vehicle.

DAILY ALLOWANCE – This add-on cover compensates you for the cost of hiring an alternative vehicle if your car is stolen or is under repairs. The amount could range from Rs 500-100 per day, depending on the car model.
The number of days for which the allowance is handed out can range from 10-15 days. However, depending on the insurer’s terms and conditions, this add-on cover is subject to certain exclusions too. This add-on is a unique concept and advisable to take.

KEY REPLACEMENT COMPENSATION – This add-on comes into play if you happen to misplace your keys or they get stolen.
The insurer will also compensate you for the cost of replacing your lock and key if your vehicle is burgled.
In case of the latter, however, you will have to produce the police complaint registered for the break-in which is mandatory and required as per rules.
Most of us are not aware of this add-on which is quite beneficial.

CONSUMABLES COVER – Another very beneficial add-on.
One can buy this add-on if one wishes to seek compensation for money spent on nuts and bolts, screen washers, engine oil, bearings and so on, in case your car meets with an accident.
The insurer will make a payout for the value of such consumables replaced which are normally excluded from claim amounts under standard motor insurance.
Generally, vehicles older than three years are not eligible for this add-on cover.

SOME HANDY TIPS

In the recent Mumbai flood many cars got damaged but very few could get their claims settled as many things were not covered in the standard insurance policy. We asked Swetank Shantanu, co-founder and partner of New Delhi based law firm Legal Consultus with around 18 years of professional experience in the field of Banking and Civil matters to advise our readers on how to be better protected and covered.
It is advisable for each and every person who is taking car insurance policy to go for the add-on cover some of which have been mentioned above. For instance, Zero Depreciation, Return to Invoice, Engine Protect, Personal Accident Cover, Quick Assistance of Road, No claim Bonus Protection, Loss of personal Belongings, Daily Allowance, Key replacement Compensation, Consumables Cover.
The benefits of these add-on covers are immense and one learns the importance of these add-on covers if faced with odd situations like the one that happened in Mumbai recently. Even otherwise, these add-on cover would always ensure your safety for all practical purposes.
As a matter of general practice, however it is often found that the car insurance policy is taken as a mere formality and one is guided by the amount and premium involved instead of the large scale benefit involved while going for add-on cover.
In most of the cases, it has been found that people are not even aware of the various add-ons and even if the agent tries to explain the importance of add-on cover, he is simply brushed aside without giving any serious thought about the same. In fact, if these add-on covers are also bought, it always helps when a claim is made as reimbursement becomes quite easy and comfortable.
It is advisable to get car insurance done after going through each and every detail as provided by the respective company of which the insurance is sought to be taken and person getting the insurance done must do a reality check and take the policy after fully understanding the basic tenets of the same. Add-on should also be bought after going through the terms and conditions of the same as the same would help in case of claim being made.
Including add-on covers in your car insurance policy might require few more pennies from your pocket, but it would mean a complete financial security towards loss or damage of your car.
A Motor policy is usually valid for a period of one year and has to be renewed before the due date. Pay the premium on time. No Insurer offers a grace period for paying the premium. In case of lapse of policy by even one day, the vehicle has to be inspected. Moreover, if a comprehensive policy is allowed to lapse for more than 90 days, the accrued benefit of NCB (No Claim Bonus) is also lost.

WHAT MOTOR INSURANCE COVERS

The damages to the vehicle due to the following perils are usually covered under OD section of the Motor Insurance policy:» Fire, Explosion, Self- Ignition, Lightning

» Burglary/Housebreaking / Theft

» Riot & Strike » Earthquake

» Flood, Storm, Cyclone, Hurricane, Tempest, Inundation, Hailstorm, Frost

» Malicious Act » Terrorism acts

» While in Transit by Rail/ Road, Inland waterways, Lift, Elevator or Air» Land slide / Rock slide

WHAT MOTOR INSURANCE EXCLUDES

The following contingencies are usually excluded under the Motor Insurance Policy:» Not having a valid Driving License

» Under Influence of intoxicating liquor/ drugs

» Accident taking place beyond Geographical limits

» While Vehicle is used for unlawful purposes

» Electrical/Mechanical Breakdowns.

car-insurance

WHAT IS THERE IN A NAME?

But all is in the name when it comes to important documents like PAN, Aadhar, driving license, voter ID, passport etc. It is important that the information in all the documents is consistent; any mismatch can create problems. Get it corrected immediately.

WORDS: SANGEETA SINHA

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back to check his voter ID and realised that he had not got it updated for long and it had his old address. Then he decided to verify his father’s name from his passport, but here also there was a mismatch; the name had his grandfather’s also added.
His driving license also did not have the complete name of his father.
The problem was not his father’s name; it was that his father’s name was written differently in all his documents.

Many did not realise that name mismatch could be a problem till linking PAN with Aadhar was made mandatory. There should be no disparity in PAN and Aadhar details; be it name, date of birth, or other personal details.
Many, particularly those from the southern states, are having problems linking their PAN with their Aadhaar card as they have two different names on both the cards. Some have initials of surname in their Aadhar and expanded version in their PAN with the result the Income Tax department’s software is not accepting the integration of the two cards.
Some states like Gujarat automatically add your husband’s/father’s name in your PAN and later if your Aadhar is without your husband’s/father’s name it will again lead to mismatch.
The IT department can give only one solution – apply for a correction in one of the two cards.
Vikas Khanna, 49, decided one fine day to streamline his finances.

He looked for a good broker and was told that it is a simple process provided all his papers are in place. Vikas had all his documents online along with his PAN, Aadhar and passport for any kind of verification.
Little did he realise though that a simple process of KYC, which could have taken few minutes will make him run around to get his documents in order.
The problem – the name of his father in PAN did not match with the one in the Aadhar card. The name of his father had a spelling mistake in his PAN card and it did not match with the spelling in other documents. So it needed a correction.
To correct that he needed to apply for a fresh PAN and for that Aadhar is mandatory now; a new notification has been released recently whereby Aadhaar has to be quoted mandatorily while applying for PAN.
His Aadhar had only year of birth and not date of birth. So he had to get his Aadhar updated. Vikas went

NAME MISMATCH
So there was a complete name mismatch. Name mismatch can lead to lot of trouble and it is important that you make sure that all your documents are consistent in terms of your name, father’s name, date of birth etc.

To illustrate with another example: Deepa’s father died in a hospital in New Delhi.

The death certificate had his name in short form, with initials only, while all his other documents like bank accounts, PAN card had his name in full.
Deepa had a tough time trying to prove to banks and others that the name in the death certificate and the one in the account belonged to the same person. Everywhere she had to produce an affidavit to prove that the name in the death certificate and the one in other bank documents were of the same person.

POINTS TO CHECK
» Check all your documents for information consistency
» Your name should be written in the same way with same spelling in all your documents
» Your passport, driving licence, Aadhar, PAN, voter Id, bank accounts, mutual funds, stocks, insurance, and any other document should have your name written in the same way
» Check for other details too like father’s name, mother’s name, date of birth, place of birth for any mismatch.
» If you find any mismatch get it corrected immediately
» Name mismatch or any other mismatch can create trouble for you later
» Even if you are not facing any problems due to any mismatch it is advisable to get it corrected and keep all records in order
» For any death in the family, make sure that the name is spelled correctly in the death certificate; you will need the death certificate for later transactions
» Corrections/changes in documents have been made simpler and can be done online
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ASK THE EXPERT

‘Make sure information in all your documents is consistent’
Rabindra Kumar, a financial adviser with more than 17 years of experience, spoke to us about why it is important to keep your documents in order. Excerpts:

Why it is important to keep consistency in your name in all your documents?
It is very important to have same name in all your documents, be it your voter Id, driving license, PAN card, Aadhar, passport or any other document. Sometimes the husband’s name is added as middle name in some documents while in others the father’s name is added.
Nothing wrong in it but make sure that the same name you use in all your documents including your bank accounts so that you don’t have any problems in any kind of financial transaction.aadharone

How do I change my surname after marriage?
Any change in surname after marriage can be done through a court affidavit. Even otherwise if you wish to change your name it can be done by providing two evidences: school leaving certificate is considered the most primary evidence, but you can use other documents also like voter ID or driving license. You can even correct your father’s name by providing two evidences.

How important is Aadhar?
It is very important to keep your Aadhar updated with all the correct information. People are finding difficulties in linking their PAN to Aadhar because of information mismatch.
Aadhar is the key point for any financial transaction. Policies change from time to time and now you need to link your Aadhar to your phone, gas connection, bank and PAN. If there is any mismatch in information your transaction can be rejected.
You can easily update your Aadhar online, so make use of the online service or go to any Aadhar centre and get all information updated including your mobile number. It is important to keep your mobile number updated as for any transaction through Aadhar you will have to provide OTP which will come on your phone.

What are the problems faced by people?
Since policies are changing it is creating a lot of problems. Like earlier when Aadhar was made, only the year of birth was given; it was only later that date of birth was added. So people who don’t have date of birth in their Aadhar need to get it added.
Though the government is trying to streamline things, till everything is in order there can be issues.
Also, in the latest KYC form it is mandatory to give the name of both father and mother, while for PAN mother’s name is optional but father’s name is mandatory.

Any advice for our readers?
Make sure information in all your documents is consistent. Though you may find it tedious, spare some time and go through all your documents and get the corrections done.
The time you spend now in getting all information corrected will help you in the future. It is important to do it now, to avoid hassles later on.